A rise in U.S. crude inventories and the truce in Nigeria have offered some relief to concerns over a potential severe supply disruption as the northern hemisphere heads into winter.

But analysts said the market remained nervous of other possible outages in the Middle East or Russia and those fears were keeping prices bubbling not far off record levels.

"If someone blows up a pipeline tomorrow in Iraq we could be back above $50 or even in the mid-$50s," said David Thurtell, a commodities strategist at Commonwealth Bank of Australia in Sydney.

"If nothing happens, we need to see some stocks building in the U.S. over the next few weeks, not only of crude but heating oil too. Then prices may head back toward the mid-$40s."

The U.S. Energy Information Administration this week reported a 3.4-million-barrel rise in U.S. crude inventories in the week to Sept. 24 - the first rise in nine weeks.

Analysts on average had expected a decline of 3.8 million barrels, as companies struggled to recover production in the Gulf of Mexico and poor weather delayed shipments into the Louisiana Offshore Oil Port following Hurricane Ivan.

But reduced refinery processing after Ivan forced gulf coast plants to temporarily close, cut into refined product supplies.

Distillate fuel stocks, including heating oil, fell 1.3 million barrels to 125.5 million, nearly 5 million barrels below this time last year, the EIA said.

Commercial heating oil tanks are running at a deficit of 1.3 million barrels compared with a year ago. Heating oil stocks normally build at this time of year ahead of peak winter demand.

NIGERIA STILL A WORRY

Oil prices broke above $50 for the first time earlier this week after Nigerian rebels threatened to launch an offensive on Friday in the Niger delta, home to most of the OPEC producer's output of 2.3 million barrels per day. Global supplies are already tightly stretched as producers pump almost at full tilt to meet the fastest growth in oil demand for 24 years.

Rebel leader Mujahid Dokubo-Asari said this week he had agreed a truce to last for the duration of talks with President Olusegun Obasanjo. But he also warned that oil companies should leave the region until a final deal was reached on autonomy and oil revenues for the impoverished Ijaw people of the delta.

Average U.S. prices this year of $39 a barrel, adjusted for inflation, are near those of the Arab oil embargo in 1973-1974. But they remain much lower than the record $80-a-barrel annual average high following the 1979 Iranian Revolution.

Tuesday's move above $50 prompted Saudi Arabia, the top OPEC exporter, to announce it would boost its official production capacity by 500,000 bpd to 11 million bpd.

The new capacity is not expected to have any immediate effect on actual production, with the kingdom already having said it would meet demand for 9.5 million bpd this month and next.